I’m a staff writer covering all things Wall Street and Investing. I have a love hate relationship with the world of finance. I am fascinated by the industry’s power and influence around the globe, and the ingenuity of the people it employs. Not so much a fan of the lack of accountability when the system fails—which it often does: I'm always on the hunt for people and companies to profile.

This Preet Bharara Speech Should Scare All Big Banks, Especially Citi

In a speech on Monday, Bharara talked about the future of big-ticket white collar criminal actions. It’s a speech that every corporate counsel is likely paying attention to, particularly the lawyers of Wall Street’s largest firms.

Bharara rejected the notion that a criminal prosecution of an institution will have catastrophic consequences.

Senior executives and corporate counsel often tell Bharara that serious enforcements, like a criminal charge, will be too much to bear for their companies; they argue that their stock will plummet, clients and customers will leave, important employees will quit and that top executives will consider leaving their posts.

Their arguments are often exaggerated, Bharara says, and his office takes them with a grain of salt.

“What I have found typically is that, in reality, as we had suspected, the sky does not fall…And so, this repeated Chicken Little routine, I will tell you, begins to wear thin. And the result is that we view with more and more skepticism and with more and more doubt all the breathless claims of catastrophic consequences made by companies both large and small.,” he said in the speech.

Bharara takes a jab at JPMorgan ChaseJPMorgan Chase and CEO Jamie Dimon saying sometimes the skies brighten rather than darken after a major enforcement action. “Stock prices remain steady, or go up, as the company is viewed as putting problems “behind it;” clients and customers and key employees don’t even bat an eye; and sometimes, the CEO even gets a raise,” he notes.

So, what does that mean for financial institutions under the watchful eye of Bharara’s office?

“I think his words pretty much encapsulate the new attitude. They’re out for blood,” says Nancy Bush, a bank analyst who runs New Jersey-based financial consulting firm, NAB Research.

That is going to be particularly scary for CitigroupCitigroup. The global banking giant is said to be facing a criminal inquiry, according to the New York Times.

The inquiry is around Citi’s Mexican banking subsidiary which was holding at least $400 million in fraudulent loans. Citi reported the fraud in February and said it was revising its previously-reported 2013 earnings to show a $400 million charge to results in the fourth quarter.

Now it appears prosecutors are getting involved in the situation. They want to know more about Citi’s internal controls; in other words, was Citi paying enough attention to what was going on in Mexico?

Bush notes that Citi has long-standing internal control problems that date back over a decade. Think 2004, that’s when Chuck Prince was CEO, and Japanese regulators shut down Citi’s local private bank over lax governance and money laundering controls. Most recently, Citi failed to get Fed approval for its capital plan after the regulator found the bank failed to improve specific areas of its risk management.

This recent problem in Mexico is again getting the attention of prosecutors and regulators at time when they’re looking to go hard.

That attention might not fare well for CEO Michael Corbat who’s been on the job for a mere 1.5 years. He was brought in to clean up the mess that cost former CEO Vikram Pandit his job. “If I were Corbat, I’d be thinking, ‘They are done going after Dimon. Now they are coming for me.’ Years of bad control might start to crash down,” says Bush.

She adds, “Corbat might be the right guy at the wrong place at the wrong time.”

Citi declined to comment to about the inquiry. The United States Attorney’s Office for the Southern District of New York also declined to comment.

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